Borrowing credit is a serious commitment, one that requires due diligence on your part. This is as much about the loan amount as it is about the paperwork. So whether you’re borrowing a £500 loan from a direct lender or a quick same-day loan for an urgent car repair, there are things you must check off your list before you sign on the dotted line. This is especially essential because some predatory lenders may disguise hidden charges and unfair loan terms and conditions in technical legal jargon that can confuse you.
This can prove costly, especially if you’re borrowing money with bad credit. For this reason, financial experts often recommend checking your paperwork and clarifying any confusion with your loan. This will save you time and money, removing stress from your borrowing decision, enabling a smoother, hassle-free loan experience.
To make this easier, we bring you a checklist you can use before you sign your loan paperwork.
Let’s dive in.
Check If Your Lender Is FCA-regulated
This is perhaps one of the most important checks you can do before anything else in your loan borrowing process. FCA authorisation lends credibility to your lender and gives you peace of mind, as they’re more likely to follow responsible lending practices. They focus on borrower welfare and promote financial inclusion, which means you can borrow in peace.
The simple way to do this is to check the FCA website and enter your lender’s details. The database will verify the lender’s or lending company’s status. If you can’t find the lender’s record on this database, do not under any circumstances proceed with the loan. It’s important to remember this, as borrowing from FCA-regulated lenders protects your rights as a borrower, which can help resolve any potential disputes.
Understanding Loan Costs
Between misleading APR rates and hidden charges, borrowers have often experienced disappointment and a sense of frustration when it comes to understanding the total cost of a loan. If you don’t want to be caught off guard by any hidden charges, check your loan document for a cost breakdown.
APR rates and pricing should be transparent and consistent. Look for a lower APR and check how much money you’d be paying over your loan period. This should help you make an informed decision about your loan. Most ethical and responsible lenders like Salad are upfront about such costs, making borrowing relatively hassle-free for even those with poor credit.
Your Repayment Schedule
When borrowing a loan, financial experts often recommend checking repayment periods and the monthly amount. This helps you with budget planning to accommodate your loan repayments, ensuring it doesn’t compromise your financial security or burden you in any way. It’s part of responsible borrowing practices, one that can give you financial clarity.
It’s also important to be aware of the fact that longer loan periods do not necessarily mean a smaller amount in repayments. On the contrary, you might pay off more in interest. So choose a loan repayment period that’s neither too long nor too short. The idea is to make repayments comfortable and not stressful.
Hidden Charges
Many experienced borrowers will tell you that it’s worth scanning your loan document for hidden charges and penalties that can surprise you if they’re missed. These are often lost in the fine print, making it doubly important for you to read through your paperwork thoroughly.
This may look like early penalty fees for repaying your loan before the agreed period, arrangement fees, origination fees, third-party costs and more. If you find something that’s worded ambiguously, feel free to clarify this with your lender. You could also ask your lender to give you an itemised list of all the fees involved in your loan so you have a better understanding of your total loan cost.
Verify Your Information
Loan agreements cannot be edited later once signed, so it’s important to read the fine print and check if your information has been entered correctly. This includes your name, address, contact information, the type of loan, the credit amount, the repayment period and other terms and conditions.
Any discrepancies in this information can complicate things down the line, creating a stressful situation. Double-check all particulars and reread the fine print so that you know exactly what you’re signing up for.
Conclusion
When you borrow the right loan from the right type of lender, you’re assured a smooth and hassle-free borrowing experience. However, this doesn’t excuse you from doing your due diligence and being aware of your rights and responsibilities as a borrower. By doing the checks we’ve discussed in this article, you can save yourself significant stress and ensure a smooth borrowing process.
